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Detroit Must Fail

Why we should forgo the bailouts altogether.

Last fall, the Center for Automotive Research produced a study predicting the economic impact of a full and a partial failure of Detroit's Big Three automakers. It wasn't the first time that General Motors, Ford, and Chrysler had found themselves in financial peril, but there now existed a very real chance that one or all of them would not survive the calendar year.As with financial companies like AIG, the case for keeping the Big Three solvent is predicated on the effect a failure would have on its adjoining industries. In its report, CAR found that, should the Big Three be allowed to fail in 2009, the U.S. economy would lose nearly 3 million jobs, which translates to some $150 billion in lost tax revenue over the next three years. The projections are bleak, and they help explain why the U.S. government continues to extend aid to the ailing automakers.What remains unexplained is the schadenfreude with which the public and Congress have responded to Detroit's plight (unless, that is, the entire nation has been subjected to driving a PT Cruiser at some time or other). But lambasting as dinosaurs the companies that have failed to make cars that the American public wants-specifically, those with better fuel economy-doesn't solve any problems. Neither does saving $20 billion this year for the purpose of teaching Detroit a lesson if it means losing 3 million jobs next year.The paradox is this: For the sake of the nation and all those hardworking Americans in its associated industries, Detroit should be kept in business. Ultimately, though, for the sake of the world, Detroit must be allowed to fail.Over the last century, no single machine has done more to shape the landscape of our nation, from the asphalt grids of our cities and suburbs to our uniquely American notion of personal space. There is, contained within the concept of the car, a sense of the American dream- by virtue not only of the freedom it affords its driver, or the Henry Ford tradition of its production, but also of the individualism our many permutations of four-wheeled personal transit embody. But the idea that our cars are extensions of our unique and individual personalities is one of the sadder marketing achievements of the last century.Then there is that strange phrase that has plagued buyers (and been a boon to the automakers) for decades: "planned obsolescence." "The car loses value the second you drive it off the lot," goes the adage. It's no surprise, then, that the average American replaces his or her car every seven years. And still, Detroit is on the brink of collapse.Why is that? Well, yes, these companies pay their U.S. workforces more in terms of salary and benefits than their foreign-owned counterparts do. And, yes, their fleets have involved some curiously bad products (seriously, the Aztec?). And sure, this summer's gasoline price hikes didn't do any favors for the past few years' voracious cars. But the problems of the automobile industry stretch far beyond Michigan. To wit, Honda, Nissan, and Toyota-the very makers of those desirably fuel-efficient cars that Americans have been dreaming of-have each endured a similarly dismal fiscal year. And even the almighty Toyota-whose December numbers out-disappointed GM's-has received government assistance.But if, as The New York Times put it last January, these bad sales are "the new normal" for automakers, that's not such a bad thing. Consider that in 2006, there were 250 million registered passenger vehicles in the United States, a country with a population of 303.8 million. We should consider it a blessing that demand for new cars reached a 25-year low in 2008. This is a trend that must continue, not out of spite for Detroit, but out of regard for the planet. It's infuriating to think that we should be replacing our cars so often-or that so many of us reside in places where we rely on them at all.Ironically, times of pecuniary hardship, for all their obvious downsides in a national (and global) consumeristic capitalist economy, afford us something valuable: a chance to reappraise our behaviors, individually and collectively. Of course, we shouldn't let the perfect be the enemy of progress; incremental improvements across vehicle lines are laudable. And yes, simple cost-benefit analysis makes clear the case to keep Detroit above ground while so many Americans are already unemployed. But we must actively seek radical change in the transportation industry in order to avoid far more dire situations than the ones that currently plague us. And so, the longer we can keep operating in this new paradigm without buying into the same old ideas-without literally buying the same old products that we know don't work-the sooner we'll see a real and sweeping change in how we get from here to there.


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